A case study of the manufacturing and shipping costs of outsourcing

Abstract

As the world continues to move into a global economy, companies have more choices in terms of who their suppliers are and who their customers are. Improved technological and communication capabilities have allowed firms to maximize the efficiency of each step of their business process. This thesis aims to explore some aspects of this outsourcing trend by looking at a test scenario involving the manufacturing and shipping costs of the production of a test part. For this project an injection molded plastic plate made of polypropylene copolymer was chosen as a test part, and requests for quotes were sent to 64 plastic injection molding firms around the world. Shipping costs were calculated based on a test firm location of Chicago, Illinois. The further the manufacturer is from the test firm location, the higher the shipping costs are. The manufacturing costs are generally lower for Asian manufacturers than for European or American manufacturers, varying inversely proportionally to the distance from the test firm location. Overall, the combined manufacturing and shipping costs are approximately parabolic when expressed as a function of distance from the test firm location.